First of all, outside of Hogan WWE didn't have a lot of clean finishes in top matches and heels never won clean back then. Flair often escaped by the skin of his teeth but he was often allowed to show more offense and intelligence in his matches than most WWE heels were at the same time.
You also didn't have monthly PPV then, you only did a few. You still needed the house shows as the life blood of the company income wise. Typically having an unstoppable fan fave chasing a heel is a bigger money maker. Hogan back then was an anomaly, he could draw a crowd wrestling anyone. Flair could draw too but the big money was in having the crowd believe they were watching "The Next Big Thing" chase the title.
The match itself is very good up until the ending. Luger very rarely bled in matches even though the NWA matches on a whole were a lot more violent than anything in WWE. I remember a non televised house show here in Pittsburgh in 1986 where Tully Blanchard, Ric Flair, Wahoo McDaniel, and Ricky Morton I believe all bled in their respective matches, just a much more brutal, more fight based wrestling style than WWE. Luger could wrestle physical matches (he did the original War Games matches remember) but he almost never bled. The "blade job" wasn't very good but if you don't do that often its not something you can just fake on the fly.
The ending was designed to drive up interest in having Luger-Flair on the house show circuit. They drew good crowds over all, and Flair took several pinfall losses in non title and tag matches but the Title Bouts typically ended in count-outs, although they were usually 20 plus minutes long and very competitive. Luger had to be protected in the Bash finish, and having the match stopped in that manner when he was on the verge of winning seemed to do that. He went forward looking like that unstoppable force of youth and strength that Flair hadn't faced since Kerry Von Erich and fans were interested.
The finish was reminiscent of Starrcade 84 where the ref stops the Dusty-Flair match when Dusty is bleeding profusely and appears to be having trouble defending himself as Flair pummels him. Dusty is redeemed when he clearly is able to fight back after the ref stops the match, he wasn't hurt that bad after all, but the match is stopped, and Flair gained a bit since he was beating Dusty pretty bad at that point. They obviously wanted to protect Luger more than that. Of course, when you are the wrestling company where wrestlers are thrown over the ropes onto concrete floors with no padding, beating each other with chairs, belts, brass knuckles, etc and bleeding all over the place (including in many previous NWA shows in Baltimore) you lose credibility when you stop a match as soon as someone bleeds. If this had been 1988 WWE where such violence was non existent then that ending would have been brilliant.
The finish comes under more scrutiny when the Bash event returns to Baltimore the following year and Flair battles Terry Funk in a match where they beat each other on tables, hit each other with chairs and belts, and beat each other with a branding iron, both busting open, and that is just the actual match, not even including the wild post match brawl that lasts nearly 15 minutes and is equally as insane.
Luger wasn't ready to be World Champ in July 1988, his promos still were improving, and he hadn't reached his peak performance wise, and the NWA was already seeing the fast ascension of Sting at this time, no doubt there was some concern over Sting maybe being the better choice as a long term replacement in the #1 spot. Luger chasing Flair was good money for the NWA over the next few months and made the Starrcade match more exciting (with the Count-Outs & DQ can change the title rule), making you think this might finally be his shot. The fault lies with the NWA being the blood & guts wrestling company of bad A#$ tough guys as opposed to the WWE where they wrestled 8 minute bouts with a handful of basic moves and very little violence, then you cant be the company that ends a match the second a guy starts to bleed (at least at Starrcade 84 Dusty did look for a bit like he was legit hurt and couldn't defend himself, Luger had Flair in the Torture Rack and was in complete control of the match!). Again, great screw job ending for 1988 WWE, not the NWA. Luger's lousy blade job just added to the mess.
In retrospect, they would have been better off with something like they did in April 96 on Nitro where Flair is in the Rack, Luger gets a drink from a fan thrown in his face by Flair's manager (JJ Dillion was with Flair in 1988, in 1996 it was Woman) while the ref has his back turned checking to see if Flair would submit, Luger drops Flair and is rolled up for the pin (with help from the ropes for leverage). It would have been creative, still preserved Luger's strength and dominance but allowed Flair to escape with the title, clearly worse for wear, plus it wouldn't have been subject to such scrutiny.
